Post of the Day
September 9, 1998

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Subject: Loan Checklist
Author: TMFRunkle

One of the hassles I've run into with getting a mortgage is that the processor always acts like it's his or her first loan. They always forget something hard to find until about 2 days before you want to close. It seems they could give you a checklist of stuff they need, and not miss something until the last minute.

Fortunately, my lender did that this time, and I'll post it here with a few things of my own (from hard experience):

  "The documentation requirements may seem ridiculous. However, I sold a house to a guy that tried all sorts of tricks to make up for his bad credit."

1. Bank statements from last three months - this is important to the lender to see how you've been moving money around. If you made any big deposits in that period from sale of stocks, or personal possessions, be prepared to provide documentation.

2. Documentation of funds - have account statements back three months from any brokerage account, DRiP plan, or whatever that you intend on withdrawing money from for your down payment.

3. Recent pay check stub - they want this to prove you haven't taken any advances on your pay, and are getting paid what you said you are.

4. Offer Letter - if you are relocating to a new location and job, have a copy of the offer letter, plus a letter saying you've begun work at that location. Your salary needs to be on it.

5. Credit Information - they want to know how much you owe to who. It can be found off of your credit report, but go ahead and tell them up front. It will save you a lot of heartbreak to know how much you can really qualify for.

6. Paper trail - keep paperwork on any and all funds you move around, such as cashed in stocks, etc. You need to be able to prove to the lender you didn't borrow the money under the table. I sold my 1964 Thunderbird, and had to make out a receipt. Then, the lender was going to check out the blue book value. It's not in the blue book, so I sent the lender a page of 64 T-Bird ads out of Hemmings Motor News to show that the price I got was fair. If the price I sold the car was out of line with its worth, the lender would suspect I borrowed the money from somebody.

7. Tax returns and W-2's - have your tax returns and W-2's from the past two years. I only needed to show my tax return for last year, and my W-2's for the past two years. However, they could easily ask for two years tax returns.

8. Cancelled checks from previous mortgage - this only happened to me once. The rates jumped 2% after my loan committment, and I suspect the mortgage broker was trying to get out of it. They asked me for one year's copies of cancelled checks from the mortgage. I didn't have them, everything I owned was in storage. Barbara and I had to drive to Perth Amboy, New Jersey to get a print out of our mortgage from the bank that held it. It was a horrible neighborhood, and I got a flat on I-95. That's another story. Anyway, be ready for this.

9. Employers address and phone number - for employment verification.

10. Copy of sales agreement from house you sold.

11. Copy of sales agreement for house you want to buy.

  "Keep on the lender, make sure they get the appraisal done right, and call the processor regularly."

The documentation requirements may seem ridiculous. However, I sold a house to a guy that tried all sorts of tricks to make up for his bad credit. He borrowed from his 401(k) without telling anybody, took advances on his pay, and advances on his credit cards. If the lender didn't go through all this, they wouldn't have caught him. A default on a house mortgage can cost the lender a lot of money, so they try to avoid this.

Keep on the lender, make sure they get the appraisal done right, and call the processor regularly. Be polite, just ask how everything is going and if you need to submit anything else. Make sure you are reachable.

My closing on this house was delayed a week, not due to my fault. The people buying the house from the people buying my house were delayed. Their lender failed to get the appraisal done on time, which delayed their approval. If they had been in constant contact with the lender, this probably wouldn't have happened.

I hope this saves headaches for somebody,
George


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